Godot’s recession: what’s different, what’s the same in 2023 | Research

Our US Recession Signal has been active for ~6 months, yet it doesn’t “feel” like a recession and US equity markets/coincident labor data are telling us we are wrong.
In high inflation recessions (1948,1969,1973,1980,1981), it takes longer for disorderly feedback loops to kick in, because economic decisions are typically motivated by nominal values.
Money illusion initially props up nominal revenues and margins, until corporates are eventually forced to absorb the higher inflation in their expenses. This delays the negative impacts of operating leverage that are usually much more apparent in low inflation recessions.
Covid/labor shortages are also more extreme in this cycle, causing decisions on layoffs to be pushed off until there is no alternative. This suggest when the labor market data does break, it will NOT be gradual.